Ageas Shareholder Against Deal: Could See Relief Rally In Its Curve

Ageas (AGS BB) shareholder against Direct Line (DLG LN) deal (Sky). Ageas’ cash curve could rally on a bid abandonment, which equity market is partly-implying.

• Sky is reporting a “top 10 investor” in Ageas, who declined to be named, sees its pursuit of DLG as “aggressive, unsolicited and opportunistic” and that it should be abandoned.
• Ageas raised its bid for DLG yesterday and its equity continues to underperform the SXIP (insurance) index. Ageas’ ’49 index constituent (AGSBB 3.25 07/02/2049) is around 10-12bp tighter since the bid but the Euro sub financials index is over 15bp tighter, so it’s only really tracked, reflecting the majority-paper bid.
• If the bid is increased and moved to more cash, the implication would be that there’s a widening trade in Ageas’ cash bonds. The implied value of the bid is around 234p per share and DLG equity is trading around 210p so the equity market sees a good chance of the bid being withdrawn which does leave a few basis points of catch-up trade, we feel.